"We hope that this does not only mean a postponement of the ultimatum for three days," Lavrov was quoted by Interfax news agency as telling reporters in Moscow after Itar-Tass news agency reported that Kyiv had decided to extend the ceasefire.

In an interview with the Guardian and four other European newspapers, Poroshenko said Ukrainian soldiers have been targeted in more than 150 attacks since the ceasefire began and that five soldiers have been killed on Friday alone. Poroshenko said Russia has done "nothing" to end the "distastrous" war.

On Thursday, he said he might not extend the truce if it appeared that rebel groups were using the break in fighting to rearm. When he announced the ceasefire on June 20, he offered rebels amnesty if they lay down their weapons.

Pro-Russian separatist leaders and mediators for the Kyiv government met in the city of Donetsk on Friday in new consultations on ending the fighting in Ukraine's Russian-speaking east, a spokeswoman for the rebels
said.

Interfax news agency said the rebels were talking to the so-called "contact group" which includes former President Leonid Kuchma, Moscow's ambassador to Kyiv and representatives of the OSCE rights and security watchdog.

A first round of talks was held last Monday and ended with a rebel commitment to honour the ceasefire.

But the Kyiv government says the rebels have carried out numerous breaches of the ceasefire over the past week, including the downing of a military helicopter on Tuesday killing nine service personnel.

Ukraine, EU sign trade, economic pact

In a separate development, Poroshenko on Friday signed a trade and economic pact with the European Union, saying it may be the "most important day" for his country since it became independent from the Soviet Union.

It was the decision of his pro-Moscow predecessor, Viktor Yanukovych, to back out of the same EU association agreement in November that touched off massive protests in Ukraine that eventually led to Yanukovych's flight abroad, Russia's annexation of the Crimean Peninsula and the ongoing tensions between Russia and Ukraine.

Later Friday, EU heads of state and government were expected to consider whether to ramp up sanctions against Russia over its conduct toward Ukraine.

Before the signing ceremony, Poroshenko brandished a commemorative pen inscribed with the date of EU's Vilnius summit where Yanukovych balked at approving the agreement.

"Historic events are unavoidable," he said.

At Friday's proceedings, the European Union signed similar association agreements with two other former Soviet republics, Moldova and Georgia.

Businesses in the three countries whose goods and practices meet EU standards will be able to trade freely in any of the EU's 28 member nations without tariffs or restrictions. Likewise, EU goods and services will be able to sell more easily and cheaply to businesses and consumers in Ukraine, Georgia and Moldova.

"It's absolutely a new perspective for my country," Poroshenko said.

"There is nothing in these agreements or in the European Union's approach that might harm Russia in any way," insisted EU President Herman Van Rompuy. But almost immediately, Moscow made clear it was reserving the right to react.

Russian reaction

Dmitry Peskov, a spokesman for President Vladimir Putin, told Russian news agencies that the Kremlin would respond to the EU-Ukraine accord "as soon as negative consequences arise for the economy."

But Peskov dismissed the threat of immediate action against Poroshenko's government. "In order for those (consequences) to arise, the signed agreement needs to be implemented," he said.

Russian President Vladimir Putin has previously imposed trade embargoes against its neighbours in response to political or economic moves that the Kremlin views as unfavourable. (Bernadett Szabo/Reuters)

Russia has previously imposed trade embargoes against its neighbours in response to political or economic moves that the Kremlin views as unfavourable.

European Commission experts estimate implementation of the deal is expected to boost Ukraine's national income by around $1.6 billion US a year. EU Enlargement Commission Stefan Fule said the trade bloc has made clear to Moscow its willingness to demonstrate that Russian economic interests will not be harmed.

Perhaps more important than the trade clauses is an accompanying 10-year plan for Ukraine to adopt EU product regulations. Such rules ease the way for international trade beyond Europe.

The deal also demands that Ukraine change the way it does business. Adopting EU rules on government contracts, competition policy and the copyright for ideas and inventions should improve the economy by making it more investor-friendly and reducing corruption.

Reminding EU leaders of the Ukrainians who died opposing Yanukovych's government and in the ongoing battle against the pro-Russian insurgency in the country's east, Poroshenko said Ukraine "paid the highest possible price to make her Europe dreams come true."

He asked EU leaders to take a further step, and formally pledge that one day Ukraine will be able to join the EU as a full-fledged member. That "would cost the European Union nothing, but would mean the world to my country," he said.

Putin calls for long-term ceasefire

Meanwhile, Putin called Friday for a long-term ceasefire in Ukraine to allow talks between representatives of Kyiv and eastern regions where rebels are waging an armed insurgency.

Poroshenko has warned a ceasefire now in place may not be extended beyond Friday night when it is due to expire if peace talks with pro-Russian separatists fail to yield a favourable outcome.

"Most important is the securing of a long-term ceasefire as a necessary condition for substantive talks between the authorities in Kyiv and representatives of the southeastern regions," Putin said.

"We sincerely strive to help the peace process," he told delegates at a diplomatic ceremony in the Kremlin.

Western governments have piled pressure on Putin to take steps to disarm the rebels who Kyiv accuses of numerous breaches of the truce aimed at giving the two sides time to find a political solution to the crisis.

Putin also said that the violence in Ukraine had forced tens of thousands of Ukrainians to seek refuge abroad, including in Russia.